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The Importance of Independence
It has been an immensely frustrating time for investors as many flagship funds have let them down. We sympathise with everyone that has struggled through this period, during which household names such as M&G Property Portfolio, Woodford and SLI GARS have all potentially contributed to reducing belief and trust in active management. These are the big names that have failed to deliver, and we can understand investor frustration completely.
However, if you have been a client of Fundhouse hopefully you would have avoided much of this. Around four years ago, we suggested clients avoid the direct property sector because “they could not cope if future outflows were similar to current inflows”. We suspended every property rating, which is something we had never done before. This saved clients during 2016, following the Brexit sell-off, and again last week with the gating of the M&G fund. Clients should be aware that we expect quite a few more property funds to gate soon. We also suspended our Woodford rating well before the fund gated, and Barnett’s Invesco High Income Fund has been rated negatively by us for two years now. We have avoided the very disappointing returns of SLI GARS and the funds subsequently managed by GARS team members now working inside other firms – Aviva AIMS and Invesco Global Targeted Returns – by rating them negatively for many years (GARS since 2014; GTR and AIMS shortly after their launch dates). We were able to avoid these significant issues well in advance of them occurring.
Although we look at funds in granular detail (the above fund reports average 25 pages in length), perhaps the main reason behind our ability to rate funds negatively (and be a lot more objective) is more to do with our unique business model. Accepting no fees from fund managers for the funds we rate, unlike many of our industry peers, has helped our clients achieve better outcomes for their own clients.